Coronavirus: Retailers warned not to expect alert level 3 spending boom

Shops itching to open once the alert level moves down a step are being warned not to expect a rush of customers.

The Government outlined on Thursday what businesses will be allowed to resume operations at alert level 3, and how. The news got Kiwis excited, with many rushing to social media vowing to wolf down as much KFC and coffee as they could once the restrictions were lifted.

But economist Stephen Knowles of the University of Otago us urging retailers to curb their expectations.

"The point I'd make is that opening is one thing, but there's a lot of people whose incomes have been cut quite drastically in recent times - either they've lost their job, they've agreed to a 20 percent pay cut or maybe they're worried about whether they will lose their job," he told Newshub.

John Milford, chief executive of the Wellington Chamber of Commerce, told The AM Show on Friday while level 3 will allow more economic activity than level 4, the hospitality industry will still find it incredibly tough.

"Their immediate challenge, particularly in the hospitality business is they need customers. The other overwhelming announcement yesterday was that if you can stay home, stay home."

He said many of Wellington's cafes and restaurants are frequented by office workers. Under level 3 rules, those who can work at home, must. 

"They're not going to be there, they're going to be home working," said Milford. "So those [food outlets] that can open are still going to be faced with a limited amount of customers."

Both are expecting the Government to boost its spending to keep as many Kiwis in jobs as possible, even if they can't work or their workplaces aren't selling as much as they used to.

"To spend money, Government either needs to earn it or borrow it," said Prof Knowles. "But we are quite fortunate in that before we went into this crisis, Government debt levels were pretty low compared to many other countries in the world, so there's certainly scope for them to borrow a lot of money."

"It's inevitable the Government is going to have recognise, particularly in hospitality and retail, that if the requirements to beat COVID-19 at a New Zealand level... we're going to have to support these businesses, because they've got no cashflow" said Milford.

"If you've got no revenue and you've got bills to pay, they've either got to be supported or they've got to be let go."

Prof Knowles says it's inevitable some food outlets won't survive, even under the less restrictive level 3 measures.

"The Government is spending a lot of money to try and put money in people's pockets - the wage subsidy would be one example of that, and welfare payments have been increased. That will give people extra money, so things will be better than if the Government had done nothing. But as the Government acknowledged when we first into lockdown... they're not going to be able to save every last job... Even under level 3 there are a lot of businesses that aren't able to open."

Auckland's streets have been emptied under the lockdown.
Auckland's streets have been emptied under the lockdown. Photo credit: Getty

Milford's Auckland counterpart, Auckland Chamber of Commerce chief executive Michael Barnett, told The AM Show on Thursday he was sick of sitting in "God's waiting room" and called for a "sensible" return to work.

"Take the pressures off the supermarkets - let the cafe open and the butchery and the greengrocer. Let the manufacturing exporter get back to work... let residential construction start. They don't stand around in groups and have a fag anymore - these guys work... Get our roading construction up again."

Milford said there was a balance to be struck, saying the lockdown was "the right thing to do for the people of New Zealand, but on the other hand, there are going to be consequences".

"We're all united in that we've got to stop this virus spreading in New Zealand, and the cost of doing that is potentially going to cost businesses and cost jobs."

Some economists have said staying in lockdown level 4 to eliminate the virus, even if it takes a bit longer than the initial four weeks, would be better than than coming out too early and having to lock everything down again in the future. 

"From a purely economic perspective, it is best to 'go early, go hard' and try to beat Covid-19 in a single push," Westpac's Dominick Stephens told Stuff earlier this week.

Prime Minister Jacinda Ardern, who'll make the call whether to lift the lockdown on advice from public health officials, agrees.

"Treasury modelling tells us that we are better off in the longer term to stay in levels 3 and 4 a bit longer now rather than to have to switch back later," Ardern said on Thursday. 

A decision is expected on Monday.